Providing revenue-generating projects under a fair mechanism: An experimental analysis

Werner Güth, Anastasios Koukoumelis, M. Vittoria Levati, Matteo Ploner

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper considers a procedurally fair provision mechanism that allows members of a small group to determine, through their bids, which project to implement. Previous experiments with (only) costly projects have demonstrated that the mechanism is efficiency enhancing. Our experiment tests whether the mechanism remains conducive to efficiency when revenue-generating, but less efficient, projects are made available. We find that this is not the case. Additionally, we detect no significant difference in bid levels depending on whether mixed valuations are present or absent, and on whether the others’ valuations are known or unknown. We interpret these results as evidence that the availability of revenue-generating projects engenders a biased perception of the efficient costly project.
Original languageEnglish
Pages (from-to)410-419
Number of pages10
JournalJournal of Economic Behavior and Organization
Volume108
DOIs
Publication statusPublished - Dec 2014

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